London borough councils set for £600m budget overspend

According to the cross-party London Councils organisation, this has risen from an earlier estimate of £400m.

The latest figure was sourced from the organisation’s most recent financial pressures survey of boroughs, carried out in September – while the previous estimate comes from June data.

The increase is due to fast-rising spending by boroughs – especially to tackle the capital’s homelessness crisis.

The capital recently saw its highest quarterly number of rough sleepers since records began, with 4,068 people found on the streets by outreach teams between July and September.

Claire Holland, the group’s acting chair, said: “London’s worsening homelessness crisis is wreaking havoc on council budgets. With one in 50 Londoners homeless and living in temporary accommodation arranged by their local borough, the human cost is enormous and financial cost utterly unsustainable.

“Alongside massive demands on adult and children’s social care services, spiralling inflation, and insufficient funding from government, boroughs are left in an extremely precarious position.”

Ms Holland, who is also the Labour leader of Lambeth Council, said: “The Chancellor must use the Autumn Statement to help councils weather the storm. We urgently need more funding support to stabilise budgets and sustain local services.”

Over £350m of the £600m overspend is in adult and children’s social care, representing 7 per cent and 9 per cent overspends on those respective budgets. A collective overspend of around £150m is forecast in homelessness budgets, where the borough average overspend is almost 50 per cent.

According to London Councils, the resources available to borough authorities remain almost a fifth (18 per cent) lower than in 2010, despite there now being almost 800,000 more Londoners – broadly equivalent to a city the size of Leeds.

The organisation is calling in the Autumn Statement for an overall funding increase of at least 9 per cent, in line with what was received at last year’s Autumn Statement. It is also calling for investment to reduce homelessness – including through uplifting Local Housing Allowance and the Homelessness Prevention Grant – and for reforms to local government’s finance system, such as giving councils longer-term funding settlements and more devolved powers.

The Department for Levelling Up, Housing and Communities (DLUHC) was approached for comment.

Responding in October to similar concerns raised by London Councils, a DLUHC spokesperson said the capital’s boroughs had received an increase of 9.3 per cent in core spending power in 2023.

They added: “We stand ready to speak to any council that has concerns about its ability to manage its finances or faces pressures it has not planned for.”